Towards the end of 2016 the FT published an article describing headhunters as the new “activists”. The FT provided examples of Search firms encouraging and even cajoling clients to embrace greater diversity at Board level. Fidelio is delighted to see the Board and Executive Search industry become part of the solution in promoting Board diversity. However, given the complexity facing corporate Boards in 2017 we argue that Search firms need to be much more than enforcement agencies; beyond activism lies fresh perspective and this is surely where Board Development and Search adds greatest value.
Fidelio’s Search for Diversity Continues
Fidelio is a keen proponent of diversity. A good 50% of Fidelio’s recent Searches have resulted in an increase of diversity of the Board or senior leadership team, and our long and shortlists are recognised for their calibre, diversity and freshness of thinking.
Picking up the gauntlet thrown down by the Davies Report, Fidelio has also designed and delivered the acclaimed “A Seat at the Table” Programme for senior female executives and directors. Now in its fourth iteration, one third of the Programme’s Alumna have moved on to more senior roles typically at Board or Executive Committee level.
Additionally, Fidelio has hosted a series of seminars and debates shedding light on how Boards can achieve greater diversity including:
- A panel discussion on Germany’s Frauenquote in January 2016
- A Board breakfast with Dame Alison Carnwath, Chairman, Land Securities on “the Role of the Chairman in Promoting Greater Board Diversity and Effectiveness”
- A breakfast with Ian Iceton, HR Director, Network Rail on “Achieving Diversity” with a specific focus on the engineering sector
- And an upcoming Board breakfast with Ann Francke, Chief Executive Officer, Chartered Management Institute: “Gender Pay Gap Reporting: What Boards Need to Know”
Fidelio has also published a number of articles exploring diversity including “Diverse Thinking + Fresh Approach = Diverse Outcome”; “Fidelio’s Search for Diversity”; “A Seat at the Table for Women”; “Not Enough Qualified Women? Nonsense”.
We live in a deeply connected and global world. It should come as no surprise that more diverse companies and institutions are achieving better performance.
McKinsey, Why Diversity Matters,
January 2015
Diverse Trends, Diverse Outcomes
Indeed the original Davies Report in 2011 was far from the end of the story. The 2015 Davies Review has been followed by the Hampton-Alexander Review in 2016 setting tougher gender diversity targets of 33% at Board level across the FTSE 350 and, importantly, also Executive targets for the FTSE 100, all to be achieved by 2020. In addition, from April 2017, corporates with more than 250 employees in the UK will be required to report on the gender pay gap.
Sectors that have been lagging in terms of gender diversity have established their own initiatives, including:
- HM Treasury’s Women in Finance Charter – the signatories of which have pledged to increase female representation in senior management to – on average – 35%.
- The Diversity Project– a recent initiative by the asset management industry which looks at diversity in it is broadest context throughout the pipeline.
- Level 20– founded in 2015, aims to increase the percentage of top female executives in European private equity to 20% by 2020.
- Parity Partners– founded in 2016, has pledged to increase the gender and ethnic diversity of senior roles in financial services, particularly private equity and venture capital.
Moving the diversity agenda beyond gender diversity, the 2016 Parker Review has also set goals for greater ethnic diversity at senior levels of corporates. This includes the requirement for FTSE 100 Boards to have at least one Director of colour by 2021 and each FTSE 350 Board to have at least one Director of colour by 2024.
This push toward greater diversity is not restricted to corporates. Arts Council England reemphasised the centrality of diversity in its recent Equality, Diversity and the Creative Case report, effectively linking public funding to diversity; a move echoed in Sport England’s Code for Sports Governance, also published last year.
Nor is this trend limited to the UK. In January 2016 the Frauenquote, a quota of 30% female representation at the Supervisory Board level, was introduced in Germany. This was followed more recently by the introduction of a 33.3% quota for women on Boards in Belgium and the increase of the quota in France from 20% to 40% representation of women as of the beginning of 2017.
It is clear that setting targets and measuring progress drives outcomes, including in diversity. At the same time our thinking about diversity is becoming – quite appropriately – multi-dimensional. At the launch of the aforementioned Diversity Project in the asset management industry, Andy Haldane, Chief Economist, Bank of England, argued that a very important dimension to diversity which is often overlooked is much more subtle: socio-economic, sociological and neurological, comprising our backgrounds, experience and personalities.
A Crisis of Trust: the ‘License to Operate’
This broader interpretation of diversity ties in very pertinently with one of the trends that wrong-footed corporates in 2016: an angry backlash against globalisation. Governments are now recognising that significant pockets of society have not benefited from increasingly free flows of trade and people; and big business is under increasing scrutiny. One strand of the pro-Brexit argument was too much regulation; but this has been trumped by increasing demand for corporate accountability.
As such, in addition to closer monitoring of diversity, corporate Boards are also facing calls from politicians and the media for improved corporate governance. For example, in December 2016 the UK Government Department for Business, Energy and Industrial Strategy published a Corporate Governance Reform Green Paper. Suggested governance improvements include employee representation on Boards, binding shareholder votes on pay and the extension of corporate governance requirements to large privately-held companies.
Corporate Boards clearly face very significant challenge with regard to the licence to operate. Companies require, at both Board and Executive level, enhanced stakeholder engagement skills to be more alert to forthcoming challenges and to be able to connect more effectively with key constituencies.
At the same time Boards must navigate an extraordinary degree of complexity. What does Brexit mean for access to the single market; are we looking at a hard, soft or transitional landing? Equally what will the new US Administration mean for global trade? What will it mean for the geo-political order?
Board Search – Challenge and Opportunity
2016 represented a challenge to the existing world order; there may well be further challenge ahead in 2017. Boards must figure out on a corporate, sectoral and national level how to craft a strategy and narrative fit for 2017, and how to secure a profitable and sustainable future for the company. Boards will only be able to achieve this with fresh perspective and this is absolutely what the Executive Search industry should be delivering.
The 2016 Christmas/New Year analysis by leading financial and political media is cautious but by no means cowed. Business leaders are called upon to be better listeners to voices of opposition and discontent; better communicators to ensure that the value and good that business can deliver is understood; and more creative thinkers to find solutions that make commercial and societal sense.
The dream of reason. After 2016 is that dream still possible? Do not underestimate the scope for people to think and innovate their way out of trouble.
The Economist,
24th December 2016
We look forward to working closely with clients on an international basis in 2017 enabling them to build Boards and leadership teams that bring fresh perspective to what might have previously seemed intractable problems. The only way to achieve this is not to become an activist pushing through one aspect of the above agenda. Rather it is essential to understand (i) the specific business challenge and (ii) the shareholder and stakeholder backdrop. Rigorous analysis here will identify what are the skills sets, experience and attributes needed within the senior team to guide the business through the challenges of 2017.
Our role is to provide clients with access to talented executives and Directors who may or may not be on the radar screen and who can bring fresh perspective and dynamism. Our role is also to support the Chairman and CEO to enable the top team to be open to new ways of addressing old problems. This is where Board and Executive Search adds value – through Search, Development and Evaluation – and this is why headhunters have a more important role to play than activists; a fresh perspective is what is needed.
For further information on Board Development and Executive Search, or Fidelio’s “A Seat at the Table” Programme please contact Emily Baker, alternatively call +44 (0) 207 759 2200.